Fixed Mortgage Rates Hold at Record Lows

By Mike Colpitts

Fixed mortgage rates remained at all-time record lows for the third straight week, while the 5-year adjustable rate loan dropped below rates last weeks averages, according to Freddie Mac. The 30-year fixed rate mortgage averaged 3.87% to match its all-time low.

The shorter term 15-year fixed rate mortgage, which many consumers are purchasing to reduce the term of their payments averaged 3.16% across the U.S., the Freddie Mac survey showed. The 5-year ARM edged narrowly lower, dropping a single basis point from a week ago to 2.83%.

Lower Treasury bond yields paid to investors declined slightly over the early part of the week to keep mortgage rates at their record lows. The 30-year mortgage has now remained below 4.00% for the past 11 weeks, and below 5.00% for the past 52 weeks. The drop in rates signals a full one year period that lenders have kept mortgage rates close or at all-time record lows in order to attract the best borrowers.

Growing confidence in the U.S. economy is also helping to boost mortgage loan activity, which has seen an increase in mortgage refinance applications from an Obama administration program that eliminated loan-to-value ratios on many underwater home mortgages.

new homes

Small business confidence picked up slightly in January, representing a fourth consecutive monthly gain, according to the National Federation of Independent Business Index.

New home builder confidence also increased for the fifth consecutive month, rising from 25 to 29 on the National Association of Homebuilders/Wells Fargo Housing Market Index. It’s the highest the index has reached in more than four years.

“This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said NAHB chief economist David Crowe. “However, it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction.”